Patent suit losers should pay victors’ fees, high court holds

The losers of patent-infringement cases who engage in “unreasonable” litigation conduct should pay the winners’ legal fees, the U.S. Supreme Court said Tuesday in a victory for companies including Google Inc. and Apple Inc.

Judges should look at the case and determine if it “stands out from others,” the high court said, easing rules that had made it difficult for the winners to get reimbursement for their costs. In a second, related, opinion, the court also limited the ability of an appeals court to overturn a trial judge’s decision in such cases.

“A case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award,” Justice Sonia Sotomayor wrote for a unanimous court.

Technology companies like Apple and Google said they are too often faced with frivolous infringement claims by patent owners who use the high cost of litigation to extract cheap and easy settlements. Congress is considering legislation that would require the loser to pay the winner’s fees except in limited circumstances.

More than 100,000 companies were threatened in 2012 alone with infringement suits by businesses whose sole mission is to extract royalty revenue, according to a White House report. Those entities, called pejoratively “patent trolls” by critics, filed 19 percent of all patent lawsuits from 2007 to 2011, according to the Government Accountability Office.

Octane Fitness LLC is seeking as much as $1.8 million in fees after defeating a patent suit. Octane was sued by Icon Health & Fitness Inc., another exercise equipment maker, over a component in elliptical machines.

Octane is challenging the test for awards established in 2005 by the U.S. Court of Appeals for the Federal Circuit, which handles patent cases. The Federal Circuit allows fees if a suit is “objectively baseless” and was filed in bad faith.

The U.S. Patent Act says fees can be awarded “in exceptional cases.” The justices said the Federal Circuit rule was too rigid.

“An ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated,” the court ruled.

In the second case, the court said the Federal Circuit should be more deferential to trial judges on the issue, and review such decisions only to see if there was an abuse of discretion.